Quick Facts

Gabon’s economic freedom score is 58.3, making its economy the 104th freest in the 2015 Index. Its overall score has increased by 0.5 point, reflecting improvements in freedom from corruption, monetary freedom, and fiscal freedom that outweigh declines in the management of government spending and business freedom. Gabon is ranked 15th out of 46 countries in the Sub-Saharan Africa region, and its overall score is lower than the world average.

Over the past five years, Gabon’s economic freedom score has advanced by 1.6 points. Led by relatively broad-based gains in six of the 10 economic freedoms, Gabon has registered a score decline since 2011 only in the management of public spending.

While economic freedom has increased, Gabon has failed to fully use the wealth generated by its vast oil to produce greater prosperity for its people by restructuring and modernizing its economy. In particular, the rule of law remains weak and not fully institutionalized. Natural resource revenues encourage rent-seeking and graft, and the judicial system continues to be arbitrary and used for political ends. An IMF bailout in 2007 has not prevented the deterioration of public finances in recent years. A closed domestic marketplace exacerbates sensitivity to price fluctuations in key industries.

Background

President Omar Bongo ruled Gabon from 1967 until his death in 2009 when his son, Ali Ben Bongo, replaced him. Opposition leaders accused the Bongo family of electoral fraud to ensure dynastic succession. In 2011, President Bongo’s Gabonese Democratic Party (PDG) took 95 percent of the seats in flawed parliamentary elections. The Bongo family is the subject of a long-running corruption investigation in France. Gabon is the fifth-largest oil producer in sub-Saharan Africa, but oil production has been declining steadily in recent years. The government is working to reduce dependence on oil and to diversify the economy by spending more on education and infrastructure.

Corruption is rampant, although Gabon ranked as less corrupt than most of its Central African neighbors in 2013. Payoffs are common in the commercial and business arenas, especially in the energy sector. The judiciary is inefficient and not independent. Some prosecutions of former government officials appear to target opposition members. Protections for property rights and contracts are not strongly enforced.

The top individual income tax rate is 35 percent. The top corporate tax rate was cut from 35 percent to 30 percent in 2013 (extractive industries and other companies can qualify for lower rates). Other taxes include a value-added tax. The overall tax burden equals 11.2 percent of economic activity. Government spending amounts to 29.1 percent of domestic output, and public debt equals 23 percent of GDP.

Despite recent reform efforts, administrative procedures for incorporating businesses remain time-consuming. On average, it takes about 200 days to complete licensing requirements. Labor regulations are outmoded, and the labor market does not function well. The state influences prices through subsidies to state-owned enterprises and direct control of the prices of other products.

Gabon’s average tariff rate is 14.5 percent. Imports of sugar, eggs, and used cars are restricted. Gabon’s Investment Charter guarantees the right of foreign investors to repatriate profits. The financial sector remains state-controlled. Credit costs are high, and access to financing is scarce, with fewer than 10 commercial banks in operation. The government controls long-term lending through the state-owned development bank.